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Abraaj Group Taking Majority Stake in CARE Hospitals

... Livemint:

Dubai-based private equity investor Abraaj Group on Wednesday said it will buy a majority stake in Hyderabad-based hospital chain Quality CARE India Ltd from global private equity firm Advent International.

Though the deal size was not disclosed, a person aware of the transaction pegged it around Rs.1,700 crore.

CARE operates in Hyderabad, Secunderabad, Visakhapatanam, Raipur, Pune, Nagpur, Bhubaneswar, Jabalpur and Surat. Founded in 1997 by Dr B. Soma Raju and a team of cardiologists, it also runs a network of telemedicine hubs in rural Andhra Pradesh and Maharashtra. It has 2,600 beds across 16 hospitals in nine cities.

“The implications of the healthcare gap in India are profound, but they translate into a long-term opportunity for Abraaj to help build a better and more sustainable healthcare infrastructure in the country. We are excited to partner with one of India’s leading healthcare providers and contribute to developing more robust health systems in growth markets,” said Sev Vettivetpillai, partner and global head of Abraaj’s Thematic Funds Business.

In November, Mint had reported about the concerns over the valuation of CARE Hospitals, which had delayed the deal. The process was started way back in April 2015. Abraaj and a consortium of private equity funds including TPG Growth and Temasek Holdings (Pvt.) Ltd were the two front runners with highest bids.

Advent International, which holds 72% stake in CARE, was looking for Rs.1,800 crore for its stake.

The bidders in the first round included three consortia; Hinduja Hospital and Everstone Capital; South African hospital chain Netcare Ltd and Bain Capital Advisors Llc; and Baring Private Equity Asia and Malaysia’s IHH Healthcare Bhd.

Advent bought a controlling stake in CARE Hospital for $105 million from investors including Rakesh Jhunjhunwala, Nimmagadda Prasad (founder of Matrix Labs) and the UK-based Ashmore in 2012. The rest was held by some of the doctors at CARE Hospital.

Abraaj also holds a stake in BSR Super Speciality Hospitals Ltd, a healthcare services chain operating in North and Central India with an investment of about $10 million.

In recent months, deal activity in the hospitals space has picked up. Many hospitals are mulling IPOs. Investors in some of the others are looking to sell their stakes.

In August, Malaysian healthcare services major IHH Healthcare Bhd (which runs Parkway Holdings, a pan-Asian hospital chain) signed definitive agreements to buy a 73.4% stake in Hyderabad-based Ravindranath GE Medical Associates Pvt. Ltd (Global Hospitals) for Rs.1,284 crore, giving exits for investors Everstone Capital and Anand Rathi Capital Advisor Pvt. Ltd.

Most private equity investors are attracted to India’s hospitals business by the huge demand-supply gap. India’s bed density is still the lowest among the BRIC (Brazil, Russia, India and China) nations, and approximately 70% of the available beds are concentrated in the top 20 cities, according to a 2014 report by PricewaterhouseCoopers (PwC). India’s healthcare infrastructure needs an additional 650,000 beds that will translate into capital investment of Rs.1.65 trillion by 2017, the report added.

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